Goldman and Wells Fargo say buy tech stocks, it's rare for them to get this cheap
Goldman Sachs and Wells Fargo are turning more constructive on beaten-down technology stocks, arguing that a recent pullback has created a rare entry point for investors. S & P 500 Index Information Technology shares have lagged the broader market with a 7% year-to-date loss as investors questioned whether heavy AI-related capital spending will translate into sustained profits. But both Wall Street firms said that weakness has pushed valuations to unusually attractive levels. .GSPT YTD mountain S & P 500 info tech sector year to date Wells Fargo strategists upgraded the S & P 500’s technology sector to favorable from neutral, pointing to strong fundamentals and easing valuation pressures after the recent drawdown. The bank said pessimism around the group appears overdone, with earnings growth still running at a double-digit pace and balance sheets remaining relatively strong. “Corporate AI technology spending appears to have enough momentum to reach $650 billion this year. And questions about AI adoption are reasonable but we do not expect entire industries to disappear, nor for large unemployment,” Wells said in a note to clients. Goldman struck a similar tone, highlighting that the sector’s valuation relative to expected growth has fallen below that of the broader global market — a rare occurrence for a group that typically trades at a premium. “These factors have opened up an opportunity in the technology sector where growth rates remain strong, but valuations are now low. In the US, the valuation premium of the technology Hyperscalers has fallen to close to the same as the rest of the market,” Goldman said in a note to clients. Goldman noted even on a backward-looking basis, valuation metrics have sunk to levels last seen in the aftermath of the early-2000s tech bust. The more bullish stance comes at a time when geopolitical risks and questions about AI’s broader economic impact have rattled markets, contributing to the sector’s recent underperformance. Still, strategists at both banks say those concerns are unlikely to derail the longer-term trajectory. — CNBC’s Michael Bloom contributed reporting.